ANALYSIS: LATAM restructures fleet for lower costs

LATAM Airlines Group will phase out 60 aircraft from its fleet through 2015 in a move that will shrink its fleet as the airline pursues lower operating costs.

The fleet restructuring plan, which the carrier unveiled more details of today, will weed out the airline group's remaining turboprop aircraft and shift the overall fleet to larger narrowbodies and next generation widebodies. Through 2015, the airline will add 47 aircraft to its fleet as it phases out 60. The total fleet size will shrink to 326 aircraft in 2015 from 339 in 2013.

"These initiatives are part of a long term strategy which we believe is key in order to have a cost efficient operation, increasing LATAM's competitiveness in the long term," says the airline.

Updated LATAM fleet plan

Source: LATAM Airlines Group

LATAM has grounded its remaining five Boeing 737s and three BombardierDash 8 Q400s, say the carrier's executives today. The aircraft were inherited by LATAM when it purchased Colombian carrier Aires, which has since been rebranded to LAN Colombia. That airline now operates AirbusA320s, Boeing 767s and Q200s.

The seven Q200s operated by LAN Colombia will also be gradually phased out in future years, reducing to two aircraft in 2015. LATAM says it will no longer have turboprops in its fleet by 2018, as it ceases turboprop flying in its domestic Colombian network.

LATAM's A320 family fleet will grow in favour of the larger A321 variant, an updated fleet plan from the airline shows. The carrier will reduce the number of A319s from 54 in 2013 to 48 in 2015, and increase the number of A321s to 32 in 2015 from 10 in 2013. The number of A320s will remain relatively flat through 2015.

For its long-haul fleet, LATAM will continue to phase out its last Airbus A330s and A340s, as it steamlines its long haul flights around the Boeing 767, 787, 777 and the incoming Airbus A350. In 2014, LATAM will phase out its remaining two A340-500s and redeliver one of four remaining A340-300s. The -500s were previously operated by TAM and the -300s by LAN. Beyond 2014, the last three A340-300s will be phased out in 2015.

The fleet restructuring has led to non-recurring costs of $17.5 million in the fourth quarter of 2013 due to penalties for anticipated aircraft redeliveries and other redelivery expenses.

On a full-year basis, such costs grew to $29 million for 2013, says LATAM.